Table of Content
What is Wash Trading?
If you have been in Bitcoin and Cryptocurrency trading for more than a year, I hope you know about wash trading and how to spot corrupt practices. If you are new to crypto trading, you need to know about it. In this short article and video, we will give you an overview and resources to get yourself educated about wash trading and how to know if you are using a fraudulent cryptocurrency exchange.
Cryptocurrency Fraud
Using cryptocurrency exchanges is almost unavoidable if you want to trade. One of our Hardforking team got burnt on Bitfinex in 2016. The exchange was hacked and he lost a significant amount of his Bitcoin. This article is not about hacks or external threats, I think we all know those risks. This article is about the threat from within, wash trading and fake volumes. Why is this an issue? Wash trading allows exchanges to fake the amount of trading happening on their exchanges thus attracting you to use them with high liquidity. Getting your orders through could be a problem and at worst the exchange could get shut down or they simply shut down and disappear with your money. I think we will see this happening in the near future.
Pump and Dumps
Many exchanges get paid to list coins and it is of real concern if they are listing a coin exclusively as this gives them the ability to wash trade that coin and make it appear like it is a hot coin to buy. You can get burnt when the coin takes off you buy in and then it crashes. The reality could be that it is just that exchange trading it, ie buying and selling it themselves. Be very careful especially with small-cap coins.
How to Check Your Crypto Exchange
This website is an excellent resource and I strongly advise checking it out. It will help you asses the real trading volume and you can spot crypto exchanges using wash trading to increase their trading volume.
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